Registered Number: 03370297

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED

31 DECEMBER 2017

TALISMAN UNDERWRITING PLC CONTENTS Page Directors and Advisers 2 Report of the Directors 3 Strategic report 4 & 5 Statement of Directors' Responsibilities 6 Independent Auditor’s Report 7 - 9 Group Profit and Loss Account 10 & 11 Statement of Comprehensive Income 11 Group Balance Sheet 12 & 13 Company Balance Sheet 14 Group Statement of Changes in Equity 15 Company Statement of Changes in Equity 16 Group Cash Flow Statement 17 Accounting Policies 18 - 23 Risk Management 24 - 26 Notes to the Financial Statements 27 - 42

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TALISMAN UNDERWRITING PLC DIRECTORS AND ADVISERS Directors Peter K Steel Chairman Robert E Eaton David Monksfield Paul F Sandilands Company Secretary Graham Hodgson Registered Office 5th Floor 70 Gracechurch Street London EC3V 0XL Auditors PKF Littlejohn LLP Statutory Auditor 1 Westferry Circus Canary Wharf London E14 4HD Solicitors Mills & Reeve LLP Botanic House 100 Hills Road Cambridge CB2 1PH Members’ Agent Argenta Private Capital Limited 70 Gracechurch Street London EC3V 0XL Bankers Coutts & Co 440 The Strand London WC2R 0QS Fund Manager Ruffer LLP 80 Victoria Street London SW1E 5JL Company Registration Number 03370297

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TALISMAN UNDERWRITING PLC REPORT OF THE DIRECTORS The Directors have pleasure in presenting their Report together with the Financial Statements for the year ended 31 December 2017. Results and Dividends The results for the year are set out on pages 10 and 11 of the Financial Statements. Dividends totalling £794,042 were paid in the year (2016 - £1,533,036). Directors

The Directors of the Company in office during the year were as follows: Peter K Steel Robert E Eaton David Monksfield Paul F Sandilands Auditors A resolution to reappoint PKF Littlejohn LLP will be proposed at the next Annual General Meeting. Disclosure of Information to Auditors In the case of each of the persons who are Directors at the time this report is approved, the following applies: (a) So far as the Directors are aware, there is no relevant audit information of which the Company’s

auditors are unaware, and (b) They have taken all the steps that they ought to have taken as a Director in order to make themselves

aware of any relevant audit information and to establish that the company’s auditors are aware of that information.

Directors’ Indemnity The Board of Directors have effected a Directors’ and Officers’ Liability Insurance policy to indemnify the Directors and Officers of the Company against loss arising from any claim made against them jointly or severally by reason of any wrongful act in their capacity as Directors or Officers of the Company. The insurance also covers the Company’s loss when it is required or permitted to indemnify the Directors or officers pursuant to the law, Common or Statutory, or the Articles of Association. The cost of this insurance is met by the Company. By Order of the Board D Monksfield Director Date: 6 June 2018

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TALISMAN UNDERWRITING PLC STRATEGIC REPORT The Directors have pleasure in presenting their Strategic Report together with the Financial Statements for the year ended 31 December 2017. Business Review Activity The principal activity of Talisman Underwriting Plc and its subsidiaries (“the Group”) in the year under review was that of underwriting insurance risks at Lloyd’s. Results The Financial Statements incorporate the annual accounting results of the syndicates on which the Group participates for the 2015, 2016 and 2017 years of account. The annual accounting technical result for the year is a loss of £1,548,941 (2016 – profit of £1,812,443) including the profit on exchange from syndicate participations reported in the non-technical account. The three hurricanes Harvey, Irma and Maria together with other major events have produced an annual accounting loss, our first annual accounting loss since the year ended 31 December 2005. The 2015 year of account closed at 31 December 2017 with a profit of £1,942,420 (2014 profit - £2,812,976). The 2016 and 2017 open underwriting years will normally close at 31 December 2018 and 31 December 2019 respectively, and the Directors expect the 2016 year of account to produce a result of between (3.1)% and 3.8% of capacity and based on current information a loss for the 2017 year of account of between (11.6)% and (2.6)% although it must be noted that many policies remain on risk. Future Developments The Group continues to write insurance business in the Lloyd’s insurance market. The capacity being underwritten on the 2018 year of account is £22,528,762 a decrease of £473,403 against the 2017 year of account. Key Performance Indicators For the 2017 calendar year the amount of gross premium written by the Syndicates on which the Group participates amounted to £23.5m (2016 - £21.9m) with a technical underwriting loss for the year of £1,548,941 (2016 – profit of £1,812,443). Risk Factors The nature of a Lloyd’s Corporate Member means that the majority of the group’s activities are carried out by the Syndicates in which it participates. The Group is not involved directly in the management of the Syndicates’ activities, including employment of Syndicate staff, as this is the responsibility of the relevant Managing Agent. Each Managing Agent will also have responsibility for the environmental activities of each Syndicate, although by their nature insurers do not produce significant environmental emissions. As a result, the Directors do not consider it appropriate to monitor and report any risk factors in relation to staff or environmental matters.

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TALISMAN UNDERWRITING PLC STRATEGIC REPORT Risk Management As a Corporate Member of Lloyd’s the majority of the risks to the Group’s future cash flows arise from its participation in the results of Lloyd’s syndicates. As detailed on page 24, these risks are mostly managed by the Managing Agents of the syndicates. This Group’s role in managing this risk in conjunction with its Members’ Agent is limited to selection of syndicate participations and monitoring performance of the syndicates. By Order of the Board D Monksfield Director Date: 6 June 2018

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TALISMAN UNDERWRITING PLC STATEMENT OF DIRECTORS' RESPONSIBILITIES The Directors are responsible for preparing the Report of the Directors, the Strategic Report and Financial Statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors have elected to prepare the Group and Parent Company Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of the profit or loss of the Group for that period. In preparing these Financial Statements, the Directors are required to:

• select suitable Accounting Policies and then apply them consistently;

• make judgments and accounting estimates that are reasonable and prudent;

• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Financial Statements;

• prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website. Legislation in the United Kingdom governing the preparation and dissemination of the Financial Statements may differ from legislation in other jurisdictions.

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TALISMAN UNDERWRITING PLC INDEPENDENT AUDITOR’S REPORT Independent Auditor’s Report to the Shareholders of Talisman Underwriting Plc Opinion

We have audited the financial statements of Talisman Underwriting Plc for the year ended 31 December 2017 which comprise the Group Profit and Loss Account, the Group Statement of Comprehensive Income, the Group and Parent Company Balance Sheet, the Group and Parent Company Statement of Changes in Equity, the Group Cash Flow Statement, the Accounting Policies, the Risk Management section and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” and FRS 103 “Insurance Contracts” (United Kingdom Generally Accepted Accounting Practice). In our opinion, the financial statements:

• give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2017 and of the group’s loss for the year then ended;

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

• have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

• the directors’ use of the going concern basis of accounting in the preparation of the financial

statements is not appropriate; or

• the directors have not disclosed in the financial statements any identified material uncertainties that

may cast significant doubt about the group’s or the parent company’s ability to continue to adopt the

going concern basis of accounting for a period of at least twelve months from the date when the

financial statements are authorised for issue.

Other information

The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information. Our opinion on the group and parent company financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

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TALISMAN UNDERWRITING PLC INDEPENDENT AUDITOR’S REPORT Independent Auditor’s Report to the Shareholders of Talisman Underwriting Plc (continued) Opinion on other matter prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit:

• the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception In light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report and the Report of the Directors.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or

• the Parent Company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of Directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit. Responsibilities of directors

As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the group and parent company financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the group and parent company financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

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TALISMAN UNDERWRITING PLC INDEPENDENT AUDITOR’S REPORT Independent Auditor’s Report to the Shareholders of Talisman Underwriting Plc (continued) Use of our report

This report is made solely to the Company’s shareholders, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s shareholders those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders as a body, for our audit work, for this report, or for the opinions we have formed. Carmine Papa (Senior statutory auditor) 1 Westferry Circus For and on behalf of PKF Littlejohn LLP Canary Wharf Statutory auditor London E14 4HD Date: 6 June 2018

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TALISMAN UNDERWRITING PLC GROUP PROFIT AND LOSS ACCOUNT

Year ended 31 December 2017 TECHNICAL ACCOUNT - GENERAL BUSINESS Note 2017 2016 Gross Premiums Written Continuing operations 1 23,520,756 21,924,512 Outward reinsurance premiums (5,224,575) (4,334,236)

_________ _________ Net Premiums Written 18,296,181 17,590,276 Change in the provision for unearned premiums Gross provision 3 527 (69,702) Reinsurers share 3 171,774 133,408 _________ _________ Earned Premiums, Net of Reinsurance 18,468,482 17,653,982 Allocated Investment Return Transferred from the Non-Technical Account 5 527,161 474,919 Claims Paid Gross amount (12,015,266) (10,109,549) Reinsurers' share 1,735,227 1,346,583

_________ _________ Net claims paid (10,280,039) (8,762,966) _________ ________ Change in Provision for Claims Gross amount 3 (6,951,501) (1,742,475) Reinsurers' share 3 4,387,906 1,063,158

_________ _______ Change in net provision for claims (2,563,595) (679,317) _________ _______ Claims Incurred, Net of Reinsurance (12,843,634) (9,442,283) Net operating expenses 4 (7,759,433) (7,641,006)

_________ _________ Balance on the Technical Account for General Business £(1,607,424) £1,045,612 _________ _________ The Accounting Policies and Notes on pages 18 to 42 form part of these Financial Statements.

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TALISMAN UNDERWRITING PLC GROUP PROFIT AND LOSS ACCOUNT Year ended 31 December 2017 NON-TECHNICAL ACCOUNT Note 2017 2016 Balance on the General Business Technical Account (1,607,424) 1,045,612 Investment income 5 58,130 339,754 Profit on exchange - syndicate participation 58,483 766,831 Other income 313,415 98,805 Other charges (752,846) (606,273)

_______ ________ (Loss)/Profit on Ordinary Activities before Taxation 6 (1,930,242) 1,644,729 Tax on (loss)/profit on ordinary activities 7 380,546 (211,892)

_______ ________ (Loss)/Profit on Ordinary Activities after Taxation 15 £(1,549,696) £1,432,837 _______ ________ STATEMENT OF COMPREHENSIVE INCOME (Loss)/Profit for the financial year (1,549,696) 1,432,837 Other Comprehensive income: Currency translation differences - - _______ _______ £(1,549,696) £1,432,837 _______ _______ All operations are continuing. The Accounting Policies and Notes on pages 18 to 42 form part of these Financial Statements.

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TALISMAN UNDERWRITING PLC GROUP BALANCE SHEET As at 31 December 2017 Registered Number 03370297 2017 2016 Syndicate Syndicate Note Participation Corporate Total Participation Corporate Total Assets Intangible Assets 9 - 220,849 220,849 - 657,093 657,093 Positive goodwill 9 - 86,370 86,370 - 119,929 119,929 Investments Financial Investments 10 23,296,179 2,556,312 25,852,491 26,651,919 2,318,422 28,970,341 Deposits with ceding undertakings 3,199 - 3,199 3,375 - 3,375 _________ _______ _________ _________ _______ _________ 23,299,378 2,556,312 25,855,690 26,655,294 2,318,422 28,973,716 _________ _______ _________ _________ _______ _________ Reinsurers’ share of technical provisions Provision for unearned premiums 1,737,049 - 1,737,049 1,677,892 - 1,677,892 Claims outstanding 11,037,408 - 11,037,408 7,053,815 - 7,053,815 _________ _______ _________ _________ _______ _________ 12,774,457 - 12,774,457 8,731,707 - 8,731,707 _________ _______ _________ _________ _______ _________ Debtors Arising out of direct Insurance operations 11 5,200,297 - 5,200,297 5,449,149 - 5,449,149 Arising out of Reinsurance operations 11 5,818,621 - 5,818,621 6,112,965 - 6,112,965 Other debtors 12 1,463,238 240,478 1,703,716 2,952,887 153,043 3,105,930 _________ _______ ________ ________ _______ ________ 12,482,156 240,478 12,722,634 14,515,001 153,043 14,668,044 _________ _______ ________ ________ _______ ________ Other Assets Cash at bank and In hand 13 1,158,912 8,048,709 9,207,621 1,388,944 6,537,124 7,926,068 Overseas deposits 2,113,164 - 2,113,164 1,932,858 - 1,932,858 Other 129,421 - 129,421 265,339 - 265,339 _________ ________ ________ ________ ________ ________ 3,401,497 8,048,709 11,450,206 3,587,141 6,537,124 10,124,265 _________ ________ ________ ________ ________ ________ Prepayments and Accrued Income Accrued interest 52,772 - 52,772 44,418 - 44,418 Deferred acquisition costs 2,886,926 - 2,886,926 2,864,329 - 2,864,329 Other prepayments and accrued income 85,163 - 85,163 76,921 - 76,921 _________ _________ _________ _________ ________ _________ 3,024,861 - 3,024,861 2,985,668 - 2,985,668 _________ _________ _________ _________ ________ _________ Total Assets £54,982,349 £11,152,718 £66,135,067 £56,474,811 £9,785,611 £66,260,422 _________ _________ _________ _________ ________ _________ The Accounting Policies and Notes on pages 18 to 42 form part of these Financial Statements.

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TALISMAN UNDERWRITING PLC GROUP BALANCE SHEET As at 31 December 2017 Registered Number 03370297 2017 2016 Syndicate Syndicate Note Participation Corporate Total Participation Corporate Total Liabilities and Shareholders’ Funds Capital and Reserves Called-up share capital 14 - 4,018,297 4,018,297 - 3,935,298 3,935,298 Capital redemption reserve - 295 295 - - - Share premium account - 2,685,726 2,685,726 - 2,548,644 2,548,644 Profit and Loss Account 15 (2,019,137) 2,435,594 416,457 2,716,379 43,816 2,760,195 ________ ________ ________ ________ ________ ________ Total Shareholders Funds (2,019,137) 9,139,912 7,120,775 2,716,379 6,527,758 9,244,137 ________ ________ ________ ________ ________ ________ Technical provisions: Provision for unearned premiums 10,237,200 - 10,237,200 10,968,384 - 10,968,384 Claims outstanding 39,224,081 - 39,224,081 34,842,688 - 34,842,688 Provisions for Other Risks and Charges Deferred taxation 16 - - - - 872,086 872,086 Deposit received from reinsurers 58,521 - 58,521 79,288 - 79,288 Creditors Arising out of direct Insurance operations 17 997,532 - 997,532 773,504 - 773,504 Arising out of Reinsurance operations 17 3,366,736 - 3,366,736 3,321,156 - 3,321,156 Other creditors including taxation and social security 18 2,550,616 1,879,749 4,430,365 3,302,465 2,217,081 5,519,546 _________ ________ _________ _________ ________ _________ 6,914,884 1,879,749 8,794,633 7,397,125 2,217,081 9,614,206 _________ ________ _________ _________ ________ _________ Accruals and Deferred Income 566,800 133,057 699,857 470,947 168,686 639,633 _________ ________ _________ _________ ________ _________ Total Liabilities £54,982,349 £11,152,718 £66,135,067 £56,474,811 £9,785,611 £66,260,422 _________ ________ _________ _________ ________ _________

The Financial Statements were approved and authorised for issue by the Board on 6 June 2018 and were signed on its behalf by: D Monksfield Director The Accounting Policies and Notes on pages 18 to 42 form part of these Financial Statements.

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TALISMAN UNDERWRITING PLC COMPANY BALANCE SHEET As at 31 December 2017 Registered Number 03370297

Note 2017 2016 Fixed Assets Investments 10 32,015 525,133 Current Assets Debtors 12 152,809 152,745 Investments 10 2,556,312 2,318,422 Cash at bank 8,036,506 6,217,794 ________ ________ 10,745,627 8,688,961 ________ ________ Creditors: amounts falling due within one year 18 (2,187,716) (1,415,234) ________ ________ Net current assets 8,557,911 7,273,727 ________ ________ Total assets less current liabilities 8,589,926 7,798,860 Provision for other risks and charges Deferred taxation 16 (24,067) (82,587) ________ ________ Net assets £8,565,859 £7,716,273 ________ ________ Capital and Reserves Called-up share capital 14 4,018,297 3,935,298 Capital redemption reserve 295 - Share premium account 2,685,726 2,548,644 Profit and Loss Account At 1 January 1,232,331 1,298,469 Profit for the year 1,423,252 1,466,898 Dividends paid (794,042) (1,533,036) ________ ________ Shareholders Funds attributable to Equity Interests £8,565,859 £7,716,273 ________ ________ The Financial Statements were approved and authorised for issue by the Board on 6 June 2018 and were signed on its behalf by: D Monksfield Director The Accounting Policies and Notes on pages 18 to 42 form part of these Financial Statements.

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TALISMAN UNDERWRITING PLC GROUP STATEMENT OF CHANGES IN EQUITY Group statement of changes in shareholders’ equity

A Ordinary Share capital

B Ordinary share

capital

Capital redemption

reserve

Share premium account

Profit and loss

account

Total

At 1 January 2016 3,330,868 1,103 - 2,044,549 2,860,394 8,236,914 Profit for the financial year

-

-

-

-

1,432,837

1,432,837

Dividends paid - - - - (1,533,036) (1,533,036) Issue of 2,414,000

ordinary A shares of 25p each

603,500

-

-

504,095

-

1,107,595

Issue of 245 ordinary B shares of 10p each

-

25

-

-

-

25

Cancellation of ordinary B shares of 10p each

-

(198)

-

-

-

(198)

At 31 December 2016

£3,934,368

£930

£-

£2,548,644

£2,760,195

£9,244,137

A Ordinary

Share capital B Ordinary

share capital

Capital redemption

reserve

Share premium account

Profit and loss

account

Total

At 1 January 2017 3,934,368 930 - 2,548,644 2,760,195 9,244,137

Loss for the financial -----year

-

-

-

-

(1,549,696)

(1,549,696)

Dividends paid - - - - (794,042) (794,042) Issue of 332,000 ordinary A shares of

25p each

83,000

-

-

137,082

-

220,082

Issue of 960 ordinary B

-shares of 10p each

-

96

-

-

-

96

Cancellation of ordinary

-B shares of 10p each

-

(97)

295

-

-

198

At 31 December 2017

£4,017,368

£929

£295

£2,685,726

£416,457

£7,120,775

The capital redemption reserve represents the nominal value of the shares redeemed and cancelled by the company. The £295 addition to the capital redemption reserve includes £198 relating to the cancellation of the B shares in 2016.

The Accounting Policies and Notes on pages 18 to 42 form part of these Financial Statements.

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TALISMAN UNDERWRITING PLC COMPANY STATEMENT OF CHANGES IN EQUITY

Company statement of changes in shareholders’ equity

A Ordinary Share capital

B Ordinary share

capital

Capital redemption

reserve

Share premium account

Profit and loss

account

Total

At 1 January 2016 3,330,868 1,103 - 2,044,549 1,298,469 6,674,989 Profit for the financial year

-

-

-

-

1,466,898

1,466,898

Dividends paid - - - - (1,533,036) (1,533,036) Issue of 2,414,000

ordinary A shares of 25p each

603,500

-

-

504,095

-

1,107,595

Issue of 245 ordinary B shares of 10p each

-

25

-

-

-

25

Cancellation of ordinary B shares of 10p each

-

(198)

-

-

-

(198)

At 31 December 2016

£3,934,368

£930

£-

£2,548,644

£1,232,331

£7,716,273

A Ordinary Share capital

B Ordinary share

capital

Capital redemption

reserve

Share premium account

Profit and loss

account

Total

At 1 January 2017 3,934,368 930 - 2,548,644 1,232,331 7,716,273

Profit for the financial year

-

-

-

-

1,423,252

1,423,252

Dividends paid - - - - (794,042) (794,042) Issue of 332,000 ordinary A shares of

25p each

83,000

-

-

137,082

-

220,082

Issue of 960 ordinary B

shares of 10p each

-

96

-

-

-

96

Cancellation of ordinary

B shares of 10p each

-

(97)

295

-

-

198

At 31 December 2017

£4,017,368

£929

£295

£2,685,726

£1,861,541

£8,565,859

The Accounting Policies and Notes on pages 18 to 42 form part of these Financial Statements.

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TALISMAN UNDERWRITING PLC GROUP CASH FLOW STATEMENT Year ended 31 December 2017 Note 2017 2016 Cash flows from operating activities (Loss)/Profit on ordinary activities before tax (1,930,242) 1,644,729 Addition of loss/(deduction of profit) attributed to syndicate transactions 1,548,941 (1,703,577) Distribution of closed year result from syndicates 3,186,575 2,031,029 ________ ________ Total 2,805,274 1,972,181 Adjustments for: (Increase)/decrease in debtors (50,578) 907 (Decrease) in creditors (208,303) (455,827) Amortisation of goodwill 33,559 45,907 Profit on sale of syndicate capacity (313,415) (79,707) Amortisation of syndicate capacity 418,953 471,712 Investment income (20,884) (4,010) Unrealised (gains) on investments (37,246) (343,764) Taxation (paid) (693,055) (327,486) ________ ________ 1,934,305 1,279,913 ________ ________ Cash flows from investing activities Investment income 20,884 4,010 Purchase of syndicate capacity (3,900) (5,821) Proceeds from sale of syndicate capacity 334,606 79,697 Purchase of investments (200,644) - _______ _______ Net cash inflow from investing activities 150,946 77,886 _______ _______ Cash flows from financing activities Equity dividends paid (794,042) (1,533,036) Issues of shares 220,376 1,107,422 _______ _______ Net cash (outflow) from financing activities (573,666) (425,614) _______ _______ Net increase in cash and cash equivalents 19 1,511,585 932,185 _______ _______ Cash and cash equivalents at beginning of year 6,537,124 5,604,939 _______ _______ Cash and cash equivalents at end of year 19 £8,048,709 £6,537,124 _______ _______ Cash and cash equivalents comprise: Cash at bank and in hand (including Funds at Lloyd’s) 8,048,709 6,537,124 _______ _______ Cash and cash equivalents 19 £8,048,709 £6,537,124 _______ _______

The Group has no control over the disposition of assets and liabilities at Lloyd’s. Consequently, the Cash Flow Statement is prepared reflecting only the movement in corporate funds, which includes transfers to and from the syndicates at Lloyd’s. The Accounting Policies and Notes on pages 18 to 42 form part of these Financial Statements.

18

TALISMAN UNDERWRITING PLC ACCOUNTING POLICIES General information The Company is a public limited company that was incorporated in England and whose registered office is 5th Floor, 70 Gracechurch Street, London, EC3V 0XL. The Group participates in insurance business as an underwriting member of various syndicates at Lloyd’s through its subsidiary undertakings. Basis of Preparation These Financial Statements have been prepared in accordance with United Kingdom Accounting Standards, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, FRS 103 “Insurance Contracts”, the Companies Act 2006 and Schedule 3 of the Large and Medium sized Companies and Groups (Accounts and Reports) Regulations, relating to insurance. The Directors do not consider the Company to be a financial institution under FRS 102. The Financial Statements are prepared under the historical cost basis of accounting modified to include the revaluation of investments and comply with applicable Accounting Standards. Accounting information in respect of the Syndicate participations has been provided by each Syndicate’s managing agent and has been reported upon by the Syndicate auditors. Going Concern The Group, through its subsidiaries participates as underwriting members of Lloyd’s. Its underwriting is supported by Funds at Lloyd’s either made available by the company directly or by its loan note holders. The Directors are of the opinion that the group and company have adequate resources to meet its underwriting and other operational obligations for the foreseeable future. Accordingly, the going concern concept has been adopted in the preparation of these Financial Statements. Basis of Accounting The Financial Statements are prepared using the annual basis of accounting. Under the annual basis of accounting a result is determined at the end of each accounting period reflecting the profit or loss from providing insurance coverage during that period and any adjustments to the profit or loss of providing insurance cover during earlier accounting periods. Amounts reported in the general business technical account relate to movements in the period in respect of all relevant years of account of the Syndicates on which the group participates. Assets and liabilities arising as a result of the underwriting activities are mainly controlled by the Syndicates’ managing agents. Accordingly, these assets and liabilities have been shown separately in the balance sheet as “Syndicate Participation”. Other assets and liabilities are shown as “Corporate”. The syndicate assets are held subject to trust deeds for the benefit of the Syndicates’ insurance creditors. The information included in these Financial Statements in respect of the Syndicates has been supplied by Managing Agents based upon the various accounting policies they have adopted. The following describes the policies they have generally adopted. General Business i. Premiums

Premiums written comprise the total premiums receivable in respect of business incepted during the year, together with any differences between booked premiums for prior years and those previously accrued, and include estimates of premiums due but not yet receivable or notified to the syndicates on which the Group participates, less an allowance for cancellations. All premiums are shown gross of commission payable to intermediaries and exclude taxes and duties levied on them.

19

TALISMAN UNDERWRITING PLC ACCOUNTING POLICIES General Business (continued) ii. Unearned Premiums

Written premium is earned according to the risk profile of the policy. Unearned premiums represent the proportion of premiums written in the year that relate to unexpired terms of policies in force at the balance sheet date, calculated on a time apportionment basis having regard where appropriate, to the incidence of risk. The specific basis adopted by each syndicate is determined by the relevant managing agent.

iii. Deferred Acquisition Costs Acquisition costs, which represent commission and other related expenses, are deferred over the period in which the related premiums are earned.

iv. Reinsurance Premiums Reinsurance premium costs are allocated by the Managing Agent of each syndicate to reflect the

protection arranged in respect of the business written and earned. v. Claims Incurred and Reinsurers’ Share

Claims incurred comprise claims and settlement expenses (both internal and external) occurring in the year and changes in the provisions for outstanding claims, including provisions for claims incurred but not reported and settlement expenses, together with any other adjustments to claims from previous years. Where applicable, deductions are made for salvage and other recoveries.

The provision for claims outstanding comprises amounts set aside for claims notified and claims incurred but not yet reported (IBNR). The amount included in respect of IBNR is based on statistical techniques of estimation applied by each syndicate’s in house reserving team and in most cases reviewed by external consulting actuaries. These techniques generally involve projecting from past experience the development of claims over time to form a view of the likely ultimate claims to be experienced for more recent underwriting, having regard to variations in the business accepted and the underlying terms and conditions. The provision for claims also includes amounts in respect of internal and external claims handling costs. For the most recent years, where a high degree of volatility arises from projections, estimates may be based in part on output from rating and other models of the business accepted and assessments of underwriting conditions. The reinsurers’ share of provisions for claims is based on calculated amounts of outstanding claims and projections for IBNR, net of estimated irrecoverable amounts, having regard to each syndicate’s reinsurance programme in place for the class of business, the claims experience for the year and the current security rating of the reinsurance companies involved. Each syndicate uses a number of statistical techniques to assist in making these estimates. Accordingly the two most critical assumptions made by each syndicates managing agent as regards claims provisions are that the past is a reasonable predictor of the likely level of claims development and that the rating and other models used including pricing models for recent business are reasonable indicators of the likely level of ultimate claims to be incurred. The level of uncertainty with regard to the estimations within these provisions generally decreases with time since the underlying contracts were exposed to new risks. In addition the nature of short tail claims such as property where claims are typically notified and settled within a short period of time will normally have less uncertainty after a few years than long tail risks such as some liability business where it may be several years before claims are fully advised and settled. In addition to these factors if there are disputes regarding coverage under policies or changes in the relevant law regarding a claim this may increase the uncertainty in the estimation of the outcomes.

20

TALISMAN UNDERWRITING PLC ACCOUNTING POLICIES

General Business (continued)

v. Claims Incurred and Reinsurers’ Share (continued)

The assessment of these provisions is usually the most subjective aspect of an insurer’s accounts and may result in greater uncertainty within an insurer’s accounts than within those of many other businesses. The provisions for gross claims and related reinsurance recoveries have been assessed on the basis of the information currently available to the directors of each syndicate’s managing agent. However, ultimate liability will vary as a result of subsequent information and events and this may result in significant adjustments to the amounts provided. Adjustments to the amounts of claims provisions established in prior years are reflected in the Financial Statements for the period in which the adjustments are made. The provisions are not discounted for the investment earnings that may be expected to arise in the future on the funds retained to meet the future liabilities. The methods used, and the estimates made, are reviewed regularly.

vi. Unexpired Risks Provision

Provisions for unexpired risks are made where the costs of outstanding claims, related expenses and deferred acquisition costs are expected to exceed the unearned premium provision carried forward at the balance sheet date. The provision for unexpired risks is calculated separately by reference to classes of business which are managed together, after taking into account relevant investment return. The provision is made on a syndicate by syndicate basis by the relevant managing agent.

vii. Closed Years of Account

At the end of the third year, the underwriting account is normally closed by reinsurance into the following year of account. The amount of the reinsurance to close premium payable is determined by the managing agent, generally by estimating the cost of claims notified but not settled at 31 December, together with the estimated cost of claims incurred but not reported at that date, and an estimate of future claims handling costs. Any subsequent variation in the ultimate liabilities of the closed year of account is borne by the underwriting year into which it is reinsured.

The payment of a reinsurance to close premium does not eliminate the liability of the closed year for outstanding claims. If the reinsuring syndicate was unable to meet its obligations, and the other elements of Lloyd’s chain of security were to fail, then the closed underwriting account would have to settle outstanding claims.

The Directors consider that the likelihood of such a failure of the reinsurance to close is extremely remote, and consequently the reinsurance to close has been deemed to settle the liabilities outstanding at the closure of an underwriting account. The group has included its share of the reinsurance to close premiums payable as technical provisions at the end of the current period, and no further provision is made for any potential variation in the ultimate liability of that year of account.

viii. Run-off Years of Account

Where an underwriting year of account is not closed at the end of the third year (a “run-off” year of account) a provision is made for the estimated cost of all known and unknown outstanding liabilities of that year. The provision is determined initially by the managing agent on a similar basis to the reinsurance to close. However, any subsequent variation in the ultimate liabilities for that year remains with the corporate member participating therein. As a result any run-off year will continue to report movements in its results after the third year until such time as it secures a reinsurance to close.

ix. Net Operating Expenses (including Acquisition Costs)

Net operating expenses include acquisition costs, profit and loss on exchange and other amounts incurred by the syndicates on which the group participates. Acquisition costs, comprising commission and other costs related to the acquisition of new insurance contracts, are deferred to the extent that they are attributable to premiums unearned at the Balance Sheet date.

21

TALISMAN UNDERWRITING PLC ACCOUNTING POLICIES

General Business (continued)

x. Distribution of Profits and Collection of Losses Lloyd’s operates a detailed set of regulations regarding solvency and the distribution of profits and payment of losses between syndicates and their members. Lloyd’s continues to require membership of syndicates to be on an underwriting year of account basis and profits and losses belong to members according to their membership of a year of account. Normally profits and losses are transferred between the syndicate and members after results for a year of account are finalised after 36 months. This period may be extended if a year of account goes into run-off. The syndicate may make earlier on account distributions or cash calls according to the cash flow of a particular year of account and subject to Lloyd’s requirements.

xi. Financial Instruments The syndicate and company investments comprise debt and equity investments, derivatives, cash and cash equivalents and loans and receivables. The debt, equity investments and derivatives are measured at fair value through profit or loss. Debtors/creditors arising from insurance/reinsurance operations shown in the Balance Sheet include the totals of all the syndicates outstanding debit and credit transactions as processed by the Lloyd’s central accounting facility. No account has been taken of any offsets which may be applicable in calculating the net amounts due between the syndicates and each of their counterparty insureds, reinsurers or intermediaries as appropriate. Recognition Financial assets and liabilities are recognised when the syndicate becomes party to the contractual provisions of the instrument. Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the syndicate after deducting all of its liabilities. Initial measurement All financial assets and liabilities are initially measured at transaction price (including transaction costs), except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value (which is normally the transaction price excluding transaction costs), unless the arrangement constitutes a financing transaction. If an arrangement constitutes a financing transaction, the financial asset or liability is measured at the present value of the future payments discounted at a market rate of interest for a similar debt instrument.

Subsequent measurement Non-current debt instruments are subsequently measured at amortised cost using the effective interest method. Debt instruments that are classified as payable or receivable within one financial year and which meet the above conditions are measured at the undiscounted amount of the cash or other consideration expected to be paid or received. Other debt instruments are measured at fair value through profit or loss. Derecognition of financial assets and liabilities Financial assets are derecognized when and only when a) the contractual rights to the cash flow from the financial asset expire or are settled, b) the syndicates transfer to another party substantially all of the risks and rewards of ownership of the financial asset, or c) the syndicates, despite having retained some significant risks and rewards of ownership, have transferred control of the asset to another party and the other party has the practical ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability unilaterally and without needing to impose additional restrictions on the transfer. Financial liabilities are derecognised only when the obligation specified in the contract is discharged, cancelled or expires.

22

TALISMAN UNDERWRITING PLC ACCOUNTING POLICIES

xi. Financial Instruments (continued) Fair value measurement The best evidence of fair value is a quoted price for an identical asset in an active market. When quoted prices are unavailable, the price of a recent transaction for an identical asset provides evidence of fair value as long as there has not been a significant change in economic circumstances or a significant lapse in time since the transaction took place. If the market is not active and recent transactions of an identical asset on their own are not a good estimate of fair value, the syndicates and group estimate the fair value by using a valuation technique. Impairment of financial instruments measured at amortised cost or cost For financial assets carried at amortised cost, the amount of an impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate, i.e. using the effective interest method. For financial assets carried at cost less impairment, the impairment loss is the difference between the asset’s carrying amount and the best estimate of the amount that would be received for the asset if it were to be sold at the reporting date. Where indicators exist for a decrease in impairment loss, and the decrease can be related objectively to an event occurring after the impairment was recognised, the prior impairment loss is tested to determine reversal. An impairment loss is reversed on an individual impaired financial asset to the extent that the revised recoverable value does not lead to a revised carrying amount higher than the carrying value had no impairment been recognised. The amount of the reversal is recognised in profit and loss immediately.

xii. Investment Return

Investment return comprises all investment income, realised investment gains and losses and movements in unrealised gains and losses, net of investment expenses and charges. Realised and unrealised gains and losses are measured by reference to the original cost of the investment if purchased in the year, or if held at the beginning of the year by reference to the current value at that date. Investment return is initially recorded in the non-technical account. A transfer is made from the non-technical account to the general business technical account to reflect the investment return on funds supporting the underwriting business.

xiii. Basis of Currency Translation

The Group financial statements are presented in sterling. The Company’s functional and presentation currency is sterling. Syndicates maintain separate funds in sterling, United States dollars, Canadian dollars and Euros. Income and expenditure in US dollars, Canadian dollars and Euros is translated at the average rate of exchange for the year. Underwriting transactions denominated in other foreign currencies are included at the rate of exchange ruling at the date the transaction is processed. Assets and liabilities are translated into sterling at the rates of exchange at the Balance Sheet date. All differences arising on the translation of foreign currency amounts in syndicates are included in either the non-technical or technical account irrespective of their treatment by the underlying syndicates.

23

TALISMAN UNDERWRITING PLC ACCOUNTING POLICIES Current Taxation The Group is taxed on its results including its share of underwriting results declared by the syndicates and these are deemed to accrue evenly over the calendar year in which they are declared. The syndicate results included in these Financial Statements are only declared for tax purposes in the calendar year following the normal closure of the year of account. No provision is made for corporation tax in relation to open years of account. However, full provision is made for deferred tax on underwriting results not subject to current corporation tax. HM Revenue and Customs (HMRC) agree the taxable results of the syndicates at a syndicate level on the basis of computations submitted by the managing agent. At the date of the approval of these Financial Statements the syndicate taxable results of years of account closed at this and at previous year ends may not have been fully agreed with the HMRC. Any adjustments that may be necessary to the tax provisions established by the Group, as a result of HMRC agreement of syndicate results, will be reflected in the Financial Statements of subsequent periods.

Deferred Taxation

Deferred tax is provided in full on timing differences which result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date. Tax is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the period end.

Deferred tax assets are recognised to the extent that it is regarded as probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Intangible Assets

Costs incurred by the Group in the Corporation of Lloyd’s auctions in order to acquire rights to participate on Syndicates’ underwriting years are included at cost within intangible fixed assets and amortised over a 3 year period beginning in the year the underwriting commences in respect of the purchased Syndicate participation.

Goodwill

Goodwill represents the excess of the cost of acquisition over the fair value of the separable net assets of businesses acquired. Goodwill is amortised through the profit and loss account in equal instalments over its estimated useful life of 5 years.

Cash Flow Statement

The Group has no control over the disposition of assets and liabilities at Lloyd’s. Consequently, the Cash Flow Statement is prepared reflecting only the movement in corporate funds, which includes transfers to and from Syndicates at Lloyd’s.

Basis of consolidation

The Group Financial Statements consolidate the Financial Statements of Talisman Underwriting Plc with those of its subsidiaries for the year ended 31 December 2017.

No profit or loss account is presented for Talisman Underwriting Plc as provided by s408 of the Companies Act 2006. The profit of the parent company for the financial year dealt within the consolidated Financial Statements of Talisman Underwriting Plc was £1,423,252 (2016 – profit £1,466,898).

The profits and losses of subsidiaries are consolidated from the date of acquisition to the date of disposal using the purchase method of accounting. The difference between the fair value of the consideration, both cash and equity instruments, and the fair value of the separable net assets acquired is amortised through the profit and loss account in equal instalments over its estimated useful life.

Uniform accounting policies are used for all Group companies. Profits or losses on intra-Group transactions are eliminated on consolidation.

24

TALISMAN UNDERWRITING PLC RISK MANAGEMENT Risk management

This section summarises the financial and insurance risks the Group is exposed to either directly at the corporate level or indirectly via its participation in the Lloyd’s syndicates. Risk background

The syndicates are exposed to a variety of financial and non-financial risks. The managing agent is responsible for managing the syndicate’s exposure to these risks and, where possible, introducing controls and procedures that mitigate the effects of the exposure to risk. Each year, the managing agent prepares a Lloyd’s Capital Return (“LCR”) for the syndicate, the purpose of this being to agree capital requirements with Lloyd’s based on an agreed assessment of the risks impacting the syndicate’s business, and the measures in place to manage and mitigate those risks from a quantitative and qualitative perspective. The risks described below are typically reflected in the LCR, and, typically, the majority of the total assessed value of the risks concerned is attributable to insurance risk. The insurance risks faced by a syndicate include the occurrence of catastrophic events, downward pressure on pricing of risks, reductions in business volumes and the risk of inadequate reserving. Reinsurance risks arise from the risk that a reinsurer fails to meet their share of a claim. The management of the syndicate’s funds is exposed to risks of investment, liquidity, currency and interest rates leading to financial loss. The syndicate is also exposed to regulatory and operational risks including its ability to continue to trade. However, supervision by Lloyd’s provides additional controls over the syndicate’s management of risks. The Group manages the risks faced by the syndicates on which it participates by monitoring the performance of the syndicates it supports. This commences in advance of committing to support a syndicate for the following year, with a review of the business plan prepared for each syndicate by its managing agent. In addition, quarterly reports and annual accounts together with any other information made available by the managing agent are monitored and if necessary enquired into. If the Group considers that the risks being run by the syndicate are excessive it will seek confirmation from the managing agent that adequate management of the risk is in place and, if considered appropriate will withdraw support from the next underwriting year. The Group relies on advice provided by the members agent which acts for it, who are specialists in assessing the performance and risk profiles of syndicates. The Group also mitigates its insurance risks by participating across several syndicates as detailed in Note 22. The Directors do not consider the Group to be a financial institution under FRS 102, on the basis that the Group itself does not undertake the business of effecting or carrying out insurance contracts. Therefore there is no requirement to discuss financial risks arising from syndicate investment activities. The analysis below provides details of the financial risks the Group is exposed to from syndicate insurance activities as required by FRS 103. Note 3 provides further analysis of sensitivities to reserving and underwriting risks.

25

TALISMAN UNDERWRITING PLC RISK MANAGEMENT Syndicate risks

i. Liquidity risk

The syndicates are exposed to daily calls on their available cash resources, principally from claims arising

from its insurance business. Liquidity risk arises where cash may not be available to pay obligations when due, or to ensure compliance with the syndicate’s obligations under the various trust deeds to which it is party.

The syndicates’ aim to manage their liquidity position so that they can fund claims arising from significant

catastrophic events, as modelled in their Lloyd’s realistic disaster scenarios (“RDS”).

ii. Interest rate and equity price risk

Interest rate risk and equity price risk is the risk that the fair value of future cash flows of financial

instruments will fluctuate because of changes in market interest rates and market prices, respectively. The Group and syndicates manage their exposure to these risks by maintaining an appropriate mix between equity and debt financial instruments, investing in both fixed and floating rate investments, and by investing in a large portfolio of high quality equity investments across of range of unrelated sectors.

iii. Currency risk

The syndicates’ main exposure to foreign currency risk arises from insurance business originating

overseas, primarily denominated in US dollars. Transactions denominated in US dollars form a significant part of the syndicates’ operations. This risk is, in part, mitigated by the syndicates maintaining financial assets denominated in US dollars against its major exposures in that currency.

The table below provides details of syndicate assets and liabilities by currency:

GBP USD EUR CAD Other Total

£ £ £ £ £ £

2017 converted converted converted converted converted converted

Total assets 9,440,451 35,251,207 3,675,282 5,080,023 1,535,386 54,982,349

Total liabilities (13,897,588) (35,292,635) (3,156,121) 3,524,738 (1,130,404) (57,001,486)

___________ __________ _________ ________ _________ __________

Surplus/(deficiency) of assets £(4,457,137) £(41,428) £519,161 £1,555,285 £404,982 £(2,019,137)

_________ _______ _______ ________ _______ _________

GBP USD EUR CAD Other Total

£ £ £ £ £ £

2016 converted converted converted converted converted converted

Total assets 9,224,262 36,608,565 3,568,814 5,338,227 1,734,943 56,474,811

Total liabilities (13,525,111) (32,178,428) (3,123,728) (3,411,547) (1,519,619) (53,758,432)

___________ __________ _________ _________ _________ __________

Surplus/(deficiency) of assets £(4,300,849) £4,430,136 £445,085 £1,926,680 £215,325 £2,716,379

_________ ________ _______ ________ _______ ________

The impact of a 5% change in exchange rates between GBP and other currencies would be £0.12m on the result for the year (2016: £0.35m).

iv. Credit risk The Syndicates, through careful monitoring of the quality of their financial counterparties, are not exposed

to significant credit risk.

26

TALISMAN UNDERWRITING PLC RISK MANAGEMENT Corporate risks i. Investment, credit, liquidity and currency risks

The significant risks faced by the Group are with regard to the investment of the available funds within its

own custody. The elements of these risks are investment risk, credit risk, liquidity risk, currency risk and interest rate risk. The main liquidity risk would arise if a syndicate had inadequate liquid resources for a large claim and sought funds from the Group to meet the claim. In order to minimise investment, credit and liquidity risk the Group’s funds are invested in readily realisable short term deposits. The syndicates can distribute their results in Pound Sterling, US Dollars or a combination of the two. The Group is exposed to movements in the US Dollar between the Balance Sheet date and the distribution of the underwriting profits and losses, which is usually in the May following the closure of a year of account. The Group does not use derivative instruments to manage risk and, as such, no hedge accounting is applied.

ii. Regulatory risks

The Group’s subsidiaries are subject to continuing approval by Lloyd’s to be a member of a Lloyd’s

syndicate. The risk of this approval being removed is mitigated by monitoring and fully complying with all requirements in relation to membership of Lloyd’s. The capital requirements to support the proposed amount of syndicate capacity for future years are subject to the requirements of Lloyd’s. A variety of factors are taken into account by Lloyd’s in setting these requirements including market conditions and syndicate performance and although the process is intended to be fair and reasonable, the requirements can fluctuate from one year to the next, which may constrain the volume of underwriting the Group is able to support.

iii. Operational risks

As there are relatively few transactions actually undertaken by the Group there are only limited systems

and operational requirements of the Group and therefore operational risks are not considered to be significant. Close involvement of all Directors in the Group’s key decision making and the fact that the majority of the Group’s operations are conducted by syndicates, provides control over any remaining operational risks.

27

TALISMAN UNDERWRITING PLC NOTES TO THE FINANCIAL STATEMENTS 1. Class of Business Gross Gross Gross Net written premiums claims operating Reinsurance 2017 premiums earned incurred expenses balance Total Direct Insurance

Accident and health 990,371 1,001,473 (537,902) (434,281) (27,571) 1,719

Motor (third party

liability) 95,240 110,100 (90,042) (32,132) 1,732 (10,342)

Motor (other classes) 1,733,321 1,786,287 (1,416,499) (514,824) 12,695 (132,341)

Marine, aviation and

Transport 2,259,405 2,314,234 (1,285,939) (922,747) (131,088) (25,540)

Fire and other

damage to property 6,266,029 6,206,004 (5,622,821) (2,133,904) 595,985 (954,736)

Third party liability 5,632,357 5,369,466 (3,235,357) (1,998,044) (99,061) 37,004

Credit and suretyship 533,896 501,044 (331,317) (173,562) (5,345) (9,180)

Legal expenses 32,183 32,843 (16,063) (16,822) 52 10

Miscellaneous 134,138 127,856 (70,079) (49,267) (10,763) (2,253)

_________ _________ ________ ________ ________ ________

17,676,940 17,449,307 (12,606,019) (6,275,583) 336,636 (1,095,659)

Reinsurance 5,843,816 6,071,976 (6,360,748) (1,483,850) 733,696 (1,038,926)

_________ _________ ________ ________ ________ ________

Total £23,520,756 £23,521,283 £(18,966,767) £(7,759,433) £1,070,332 £(2,134,585)

_________ _________ ________ ________ _________ ________

2016 Direct Insurance

Accident and health 1,001,885 1,000,155 (502,848) (463,466) (21,252) 12,589

Motor (third party

liability) 134,209 148,657 (87,728) (51,411) (3,273) 6,245

Motor (other classes) 1,666,411 1,599,631 (1,618,078) (513,650) 396,168 (135,929)

Marine, aviation and

Transport 2,161,694 2,292,490 (1,212,183) (969,048) (104,088) 7,171

Fire and other

damage to property 5,814,574 5,859,270 (2,799,337) (2,046,421) (776,207) 237,305

Third party liability 4,863,272 4,581,374 (2,890,130) (1,713,360) (81,822) (103,938)

Credit and suretyship 311,685 309,694 (177,334) (90,194) (32,558) 9,608

Legal expenses 35,579 37,494 (17,402) (19,683) 4 413

Miscellaneous 137,165 173,954 (75,624) (63,485) (6,761) 28,084

_________ _________ ________ ________ ________ ________

16,126,474 16,002,719 (9,380,664) (5,930,718) (629,789) 61,548

Reinsurance 5,798,038 5,852,091 (2,471,360) (1,710,288) (1,161,298) 509,145

_________ _________ ________ ________ ________ ________

Total £21,924,512 £21,854,810 £(11,852,024) £(7,641,006) £(1,791,087) £570,693

_________ _________ ________ ________ _________ ________

28

TALISMAN UNDERWRITING PLC NOTES TO THE FINANCIAL STATEMENTS 2. Geographical Analysis 2017 2016 Direct Net Premium Written in: United Kingdom £17,676,940 £16,126,474

________ _________ 3. Technical provisions 2017 2016 Gross Reinsurance Net Gross Reinsurance Net £ £ £ £ £ £ Movement in claims outstanding At 1 January 34,842,688 (7,053,815) 27,788,873 28,112,550 (5,037,679) 23,074,871 Movement in technical account (6,951,501) 4,387,906 (2,563,595) (1,742,475) 1,063,158 (679,317) Other movements 11,332,894 (8,371,499) 2,961,395 8,472,613 (3,079,294) 5,393,319 ________ ________ _________ ________ ________ _______ At 31 December £39,224,081 £(11,037,408) £28,186,673 £34,842,688 £(7,053,815) £27,788,873 __________ _________ _________ _________ ________ _________ 2017 2016 Gross Reinsurance Net Gross Reinsurance Net £ £ £ £ £ £ Movement in unearned premiums At 1 January 10,968,384 (1,677,892) 9,290,492 9,615,491 (1,369,747) 8,245,744 Movement in technical account (527) (171,774) (172,301) 69,702 (133,408) (63,706) Other movements (730,657) 112,617 (618,040) 1,283,191 (174,737) 1,108,454 ________ ________ ________ ________ ________ ________ At 31 December £10,237,200 £(1,737,049) £8,500,151 £10,968,384 £(1,677,892) £9,290,492 _________ ________ ________ _________ ________ ________

2017 2016 Net Net £ £ Movement in deferred acquisition costs At 1 January 2,864,329 2,436,148 Movement in deferred acquisition costs 92,358 21,352 Other movements (75,736) 406,829 _________ _________ At 31 December £2,880,951 £2,864,329 _________ _________

Included within other movements are foreign exchange movements in restating the opening balances and the effect of the 2014 and prior years’ technical provisions being reinsured to close into the 2015 year of account (2016: 2013 and prior years’ technical provisions being reinsured to close into the 2014 year of account), where the Company’s syndicate participation portfolio has changed between those two years of account. The substantial changes in other movements are due to the Group’s growth in Syndicate participation as can be seen in Note 22.

Assumptions, changes in assumptions and sensitivity As described on page 24 the majority of the risks to the Group’s future cash flows arise from its

participation in the results of Lloyd’s syndicates and are mostly managed by the managing agents of the syndicates. The Group’s role in managing these risks, in conjunction with the Group’s member’s agent, is limited to a selection of syndicate participations and monitoring the performance of the syndicates and their managing agents.

The amounts carried by the Group arising from insurance contracts are calculated by the managing

agents of the syndicates and derived from accounting information provided by the managing agents and reported upon by the syndicate auditors.

29

TALISMAN UNDERWRITING PLC NOTES TO THE FINANCIAL STATEMENTS 3. Technical provisions (continued) The key assumptions underlying the amounts carried by the Group arising from insurance contracts are:

• the net premiums written calculated by the managing agent are an accurate assessment of the premiums payable as a result of the risks contractually committed to up to the Balance Sheet date;

• the net unearned premiums calculated by the managing agent are an accurate assessment of the net premiums written that reflect the exposure to risks arising after the Balance Sheet date, including appropriate allowance for anticipated losses in excess of the unearned premium;

• the claims reserves calculated by the managing agent are an accurate assessment of the ultimate liabilities in respect of claims relating to events up to the Balance Sheet date;

• the potential ultimate result of run-off year results has been accurately estimated by the managing agent; and

• the value of investments and other assets and liabilities are correctly stated at their realisable values at the Balance Sheet date.

There have been no changes to these assumptions in 2017. The amounts carried by the Group arising from insurance contracts are sensitive to various factors as

follows:

• a 5% increase/decrease in net earned premium (with all other underwriting elements assumed to change pro-rata with premium) will increase/decrease the Company’s pre-tax profit/loss by £0.9m (2016: £0.9m);

• a 5% increase/decrease in the managing agents’ calculation of gross claims reserves will decrease/increase the Company’s pre-tax profit/loss by £2.0m (2016: £1.7m);

• a 5% increase/decrease in the managing agents’ calculation of net claims reserves will decrease/increase the Company’s pre-tax profit/loss by £1.4m (2016: £1.4m).

The 5% movement has been selected to give an indication of the possible variations in the assumptions used.

The historical gross and net claims development by year of account (YOA) is as follows:

Gross basis at 31 December 2017 – in £’000 Underwriting year

After 12 months

After 24 months

Ultimate Earlier YOA

Ultimate & Earlier

Cumulative payments

Total

2011 8,160 13,233 12,685 5,670 18,355 (11,275) 7,080 2012 8,191 11,925 11,561 11,561 (9,755) 1,806 2013 6,069 10,696 10,270 10,270 (8,204) 2,066 2014 5,840 10,471 10,850 10,850 (7,611) 3,239 2015 5,832 11,619 11,915 11,915 (6,005) 5,910 2016 6,859 14,173 14,173 (4,836) 9,337 2017 11,922 11,922 (2,136) 9,786

£89,046 £(49,822) £39,224

Net basis at 31 December 2017 – in £’000 Underwriting year

After 12 months

After 24 months

Ultimate Earlier YOA

Ultimate & Earlier

Cumulative payments

Total

2011 6,599 10,861 10,085 3,815 13,900 (9,025) 4,875 2012 6,512 10,270 9,553 9,553 (8,073) 1,480 2013 5,140 9,372 8,807 8,807 (7,022) 1,785 2014 5,063 9,289 9,235 9,235 (6,778) 2,457 2015 5,017 10,073 10,193 10,193 (5,380) 4,813 2016 5,525 11,306 11,306 (4,185) 7,121 2017 7,392 7,392 (1,736) 5,656

£70,386 £(42,199) £28,187

30

TALISMAN UNDERWRITING PLC NOTES TO THE FINANCIAL STATEMENTS 4. Net Operating Expenses 2017 2016 Acquisition costs (6,485,270) (6,026,484) Change in deferred acquisition costs 92,358 21,352 Administrative expenses (1,366,521) (2,273,141) Profit on exchange - - Reinsurer’s commissions and profit participations - 637,267 ________ ________ £(7,759,433) £(7,641,006) ________ ________ 5. Investment Income 2017 2016 Investment income – financial instruments held at fair value through profit or loss Dividend income and interest 504,410 496,540 Realised gains and losses 63,814 4,422 Unrealised gains and losses - net 40,534 335,355 ________ ________ Investment income 608,758 836,317 ________ ________ Bank interest 20,884 18,493 Investment management expenses (44,351) (40,137) ________ ________ Total investment return £585,291 £814,673 ________ ________ Recognised in: Technical account 527,161 474,919 Non-technical account 58,130 339,754 ________ ________ Total investment return £585,291 £814,673 ________ ________ 6. (Loss)/Profit on Ordinary Activities before Taxation 2017 2016 This is stated after charging/(crediting): Chairman’s remuneration £ 10,000 £ 10,000 Directors’ remuneration- excluding Chairman. £ 22,500 £ 22,500 Other staff costs £ 9,000 £ 9,000 Auditors’ remuneration - audit of these Financial Statements £ 25,000 £ 24,780 - audit of the Company’s subsidiaries £ 18,000 £ 18,000 - tax compliance services £ 14,700 £ 14,700 Profit on sale of capacity £ 313,415 £ 79,707 Other professional fees £ 11,732 £ 10,150 Amortisation of syndicate capacity £ 418,953 £471,712 Amortisation of goodwill £ 33,559 £ 45,908 Exchange loss/(gain) £ 150,578 £(229,394) _______ ______ The Group has no employees other than the Directors and the Company Secretary.

31

TALISMAN UNDERWRITING PLC NOTES TO THE FINANCIAL STATEMENTS 7. Taxation 2017 2016 Analysis of Charge in Year Corporation tax: UK corporation tax on profit of the year 551,510 590,432 Prior year adjustment 5,923 (46,417) Overseas taxation (29,036) (11,227) _______ _______ 528,397 532,788 Deferred tax: Origination and reversal of timing differences (834,568) (233,496) Adjustment in respect of previous period - (30,001) Change in tax rate (74,375) (57,399) _______ _______ Total tax (credit)/charge £(380,546) £211,892 _______ _______ Factors affecting tax (credit)/charge for year 2017 2016

The tax assessed for the year is different to the standard rate of corporation tax in the UK. The differences are explained below:

(Loss)/Profit on ordinary activities before tax £(1,930,242) £1,644,729 _______ ________

(Loss)/Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 19.25% (2016 – 20%) (371,572) 328,946

Effects of: Permanent disallowance 14,697 23,367 Rate change adjustments (558) (52,776) Foreign tax paid (29,036) (11,227) Prior year adjustment 5,923 (76,418)

_______ _______

Tax (credit)/charge for year £(380,546) £211,892 _______ _______

Factors that may affect future tax charges

The results of the Group’s participation on the 2015, 2016 and 2017 years of account, will not be assessed to tax until the year ended 31 December 2018, 2019 and 2020 respectively being the year after the calendar year result of each run-off year or the normal date of closure of each year of account. In addition, tax only Claims Equalisation Reserves (CER) may further affect the timing of the taxation of underwriting profits. At 31 December 2017 the Group had a CER of £1,510,547 (2016 - £1,888,185) which will be subject to UK corporation tax as it is released in future years.

Legislation was passed on 18 November 2016 to reduce the main rate of corporation tax to 19% with effect from 1 April 2017 and 18% with effect from 1 April 2020. Further legislation was introduced on 15 September 2016 to reduce the main rate of corporation tax to 17% with effect from 1 April 2020 (this supersedes the 18% rate).

32

TALISMAN UNDERWRITING PLC NOTES TO THE FINANCIAL STATEMENTS 8. Dividends 2017 2016 Equity dividends declared and paid £794,042 £1,533,036 ________ ________ 9. Intangible Assets and Positive Goodwill 2017 2016 Purchased Positive Syndicate Cost Goodwill Capacity At 1 January 2017 193,578 4,160,608 Additions - 3,900 Disposals - (242,583) ________ ________ At 31 December 2017 193,578 3,921,925 ________ ________ Amortisation At 1 January 2017 (73,649) (3,503,515) Provided during the year (33,559) (418,953) Disposals - 221,392 ________ ________ At 31 December 2017 (107,208) (3,701,076) ________ ________ Net Book Value At 31 December 2017 £86,370 £220,849 _______ _______ At 31 December 2016 £119,929 £657,093 _______ _______ 10. Investments Company 2017 2016 Fixed asset investments Subsidiary Subsidiary Undertakings Undertakings At 1 January 525,133 525,133 Impairment of investment in subsidiaries (493,118) - ________ ________ At 31 December £32,015 £525,133 _________ ________

.

33

TALISMAN UNDERWRITING PLC NOTES TO THE FINANCIAL STATEMENTS

10. Investments (continued)

The Company has the following beneficial interests, held either directly or indirectly in group undertakings:

Direct/ indirect Ownership Country of Business Name interest interest incorporation activity

Talisman Corporate Direct 100% England and Wales Lloyd’s corporate Underwriting Limited member

Talisman Corporate Direct 100% England and Wales Lloyd’s corporate Underwriting 1999 Limited member

Talisman Corporate Direct 100% England and Wales Lloyd’s corporate Underwriting 2000 Limited member

D S Adams LLP Direct 100% England and Wales Lloyd’s corporate member Ashmore UTG LLP Direct 100% England and Wales Lloyd’s corporate member Leonid Underwriting LLP Direct 100% England and Wales Lloyd’s corporate member Goodhart Limited Direct 100% England and Wales Lloyd’s corporate member Talisman Corporate Limited Direct 100% England and Wales LLP corporate partner Seven Underwriting LLP Indirect 100% England and Wales Lloyd’s corporate member John Stevens LLP Indirect 100% England and Wales Lloyd’s corporate member

The registered office of the above subsidiaries is 5th Floor, 70 Gracechurch Street, London EC3V 0XL.

The Group and Company also hold the following investments:

Group

Other Financial Investments - Syndicate 2017 2016 Market Market value Cost value Cost Shares and other variable yield securities and units in unit trusts 3,628,037 3,684,408 4,012,383 3,833,885 Debt securities and other fixed income securities 18,724,866 18,869,556 21,478,076 21,364,980 Participation in investment pools 449,160 405,850 520,333 475,447 Loans secured by mortgages 405,580 116,420 16,097 16,144 Other loans 70,362 290,875 75,184 75,331 Deposits with credit institutions 573 6,344 171,509 171,509 Overseas deposits 2,996 4,629 314,245 314,245 Other 14,605 14,641 64,092 16,903

_________ _________ _________ _________

£23,296,179 £23,392,723 £26,651,919 £26,268,444 _________ _________ _________ _________

34

TALISMAN UNDERWRITING PLC NOTES TO THE FINANCIAL STATEMENTS

10. Investments (continued)

The Group uses the following hierarchy for determining and disclosing the fair value of financial investments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets. Level 2: prices based on recent transactions in identical assets. Level 3: priced determined using a valuation technique.

Financial investments – Syndicate Financial investments Held at Held at fair value through profit or loss amortised Level 1 Level 2 Level 3 Total cost Total 2017

Shares and other variable yield securities and units in unit trusts 732,947 2,710,954 184,136 3,628,037 - 3,628,037 Debt securities and other fixed income securities 4,984,678 13,740,188 - 18,724,866 - 18,724,866 Participation in investment pools 134,384 181,651 133,125 449,160 - 449,160 Loans and deposits with credit Institutions 344,820 14,766 45,994 405,580 - 405,580 Derivatives - - - - - - Other investments 13,649 74,840 47 88,536 - 88,536 ________ ________ _______ ________ ______ ________ Fair value £6,210,478 £16,722,399 £363,302 £23,296,179 £- £23,296,179 ________ _________ _______ _________ ______ _________

Financial investments – Corporate Financial investments Held at Held at fair value through profit or loss amortised Level 1 Level 2 Level 3 Total cost Total 2017 Shares and other variable yield securities and units in unit trusts - 2,556,312 - 2,556,312 - 2,556,312 ______ ________ _____ ________ ______ ________ Fair value £- £2,556,312 £- £2,556,312 £- £2,556,312 ______ _________ _____ ________ ______ ________ Total ______ ______ ______ Cost £2,219,092 £- £2,219,092 ________ ______ ________

The Corporate Investments comprise units held in the Ruffer LLP Total Return International Fund and are deposited at Lloyd’s to support the Group’s underwriting (see Note 23).

35

TALISMAN UNDERWRITING PLC NOTES TO THE FINANCIAL STATEMENTS 10. Investments (continued) Financial investments – Syndicate Financial investments Held at Held at fair value through profit or loss amortised Level 1 Level 2 Level 3 Total cost Total 2016

Shares and other variable yield securities and units in unit trusts 976,508 3,034,869 1,008 4,012,385 - 4,012,385 Debt securities and other fixed income securities 5,285,427 16,192,647 - 21,478,074 - Participation in investment pools 182,901 172,446 164,989 520,336 - 520,336 Loans and deposits with credit Institutions 384,373 207,701 11,054 603,128 - 603,128 Derivatives 11,183 26,582 89 37,854 - 37,854 Other investments - - 142 142 - 142 ________ ________ _______ ________ ______ ________ Fair value £6,840,392 £19,634,245 £177,282 £26,651,919 £- £26,651,919 ________ _________ _______ _________ ______ _________

Financial investments – Corporate Financial investments Held at Held at fair value through profit or loss amortised Level 1 Level 2 Level 3 Total cost Total 2016

Shares and other variable yield securities and units in unit trusts - 2,318,422 - 2,318,422 - 2,318,422 ______ ________ _____ ________ ______ ________ Fair value £- £2,318,422 £- £2,318,422 £- £2,318,422 ______ _________ _____ _________ ______ ________ Total ______ ______ ______ Cost £2,018,448 £- £2,018,448 _________ ______ _________

11. Debtors arising out of Direct Insurance and Reinsurance Operations 2017 2016 Syndicate Syndicate Participation Corporate Total Participation Corporate Total Direct insurance operations Policyholders 5,068,782 - 5,068,782 5,311,341 - 5,311,341 Intermediaries 131,515 - 131,515 137,808 - 137,808 _______ ___ _______ _______ ___ _______ £5,200,297 £- £5,200,297 £5,449,149 £- £5,449,149 _______ ___ _______ _______ ___ _______ Reinsurance operations 5,818,621 5,818,621 6,112,965 - 6,112,965 _______ ___ _______ _______ ___ _______ £5,818,621 £- £5,818,621 £6,112,965 £- £6,112,965 _______ ___ _______ _______ ___ _______

Debtors arising out of direct and reinsurance operations includes £90,729 (2016 - £173,808) and £2,144,204 (2016 - £ 2,700,740) respectively which is due after more than one year.

36

TALISMAN UNDERWRITING PLC NOTES TO THE FINANCIAL STATEMENTS

12. Other Debtors Group 2017 2016 Syndicate Syndicate Participation Corporate Total Participation Corporate Total Deferred tax asset (Note 16) - 36,857 36,857 - - - Other 1,463,238 203,621 1,666,859 2,952,887 153,043 3,105,930 ________ _______ ________ ________ _______ ________ £1,463,238 £240,478 £1,703,716 £2,952,887 £153,043 £3,105,930 ________ _______ ________ ________ _______ ________ Company 2017 2016 Amounts due from group undertakings - - Other debtors 149,637 149,637 Prepayments and accrued income 3,172 3,108 _________ _______ £152,809 £152,745 _________ ______ 13. Cash at Bank and in Hand 2017 2016 Syndicate Syndicate Participation Corporate Total Participation Corporate Total Lloyd’s deposit - 5,985,801 5,985,801 - 3,244,564 3,244,564 Cash at bank 1,158,912 2,062,908 3,221,820 1,388,944 3,292,560 4,681,504 _______ ________ ________ _______ ________ ________ £1,158,912 £8,048,709 £9,207,621 £1,388,944 £6,537,124 £7,926,068 _______ ________ ________ _______ ________ ________ The Lloyd’s deposit represents monies deposited with the Corporation of Lloyd’s (Lloyd’s) to support the

Group’s underwriting activities (see Note 23).

37

TALISMAN UNDERWRITING PLC NOTES TO THE FINANCIAL STATEMENTS 14. Called-up Share Capital 2017 2016 Allotted, Allotted, called-up called-up and and fully paid fully paid 16,069,472 (2016: 15,737,472) Ordinary A shares of 25p each 4,017,368 3,934,368 9,291 (2016: 9,301) Ordinary B shares of 10p each 929 930 _________ ________ £4,018,297 £3,935,298 _________ ________

The Company has issued two classes of shares, Ordinary A shares and Ordinary B shares. The Ordinary A shares and Ordinary B shares carry the right for the shareholder to participate in the underwriting profits of the Company resolved to be distributed by the Company. The A shares also entitle the shareholder to participate on any investment income and gains generated on funds held by the Company to the exclusion of any other class of shares. Each Ordinary A shareholder is entitled to a single vote for every A share held. Each Ordinary B shareholder is entitled to one thousand votes for every B share held. On winding up of the Company the capital and assets available for distribution will be divided amongst the members in proportions to the amounts paid up on the shares. 332,000 Ordinary A shares (2016: 2,414,000 Ordinary A shares) were issued at an average price of £0.6629 per Ordinary A share and 960 Ordinary B shares (2016: 245 Ordinary B shares) were issued at par in 2017. In addition 970 Ordinary B shares were cancelled at par in 2017.

15. Profit and Loss Account

Group 2017 Syndicate Participation Corporate Total Retained profit brought forward 2,716,379 43,816 2,760,195 Profit/(loss) for the financial year (1,548,941) (755) (1,549,696) Dividends - (794,042) (794,042) Transfer (3,186,575) 3,186,575 - ________ ________ ________ Retained profit carried forward £(2,019,137) £2,435,594 £416,457 ________ ________ ________

38

TALISMAN UNDERWRITING PLC NOTES TO THE FINANCIAL STATEMENTS 16. Deferred Taxation Group 2017 2016 Opening balance – Deferred tax liability 872,086 1,192,982 Profit and loss account (credit) for the financial year (908,943) (320,896) _______ _______ Closing balance – Deferred tax (asset)/liability £(36,857) £872,086 _______ _______ Deferred tax consists of the following items: Underwriting (losses) and profits not subject to current taxation (308,755) 513,351 Claims Equalisation reserve 271,898 358,735 _______ _______ £(36,857) £872,086 _______ _______

The deferred tax asset is included in other debtors (see Note 12). Deferred tax has been calculated using the tax rates at which it is expected to reverse being either 17% or 19% (2016 –19%). The deferred tax balance consists of underwriting profits and (losses) and the claims equalisation reserve that are expected to reverse:

2017 2016 Within one year 430,503 517,333 Over one year (467,360) 354,753 _______ _______ £(36,857) £872,086 _______ _______

39

TALISMAN UNDERWRITING PLC NOTES TO THE FINANCIAL STATEMENTS 16. Deferred Taxation (continued) Company 2017 2016 Opening balance – Deferred tax liability 82,587 166,580 Profit and loss account charge for the financial year (58,520) (83,993) _______ _______ Closing balance – Deferred tax liability £24,067 £82,587 _______ _______ Deferred tax consists of the following items: Underwriting profits not subject to current taxation £24,067 £82,587 _______ _______ £24,067 £82,587 _______ _______ Deferred tax has been calculated using a tax rate of 19% (2016 – 19%). The deferred tax balance is expected to reverse: 2017 2016 Within one year 24,067 34,537 Over one year - 48,050 _______ _______ £24,067 £82,587 _______ _______

The deferred tax balance arises on Talisman Underwriting Plc’s participation on the LLP Corporate Members.

17. Creditors arising out of Direct Insurance and Reinsurance Operations 2017 2016 Syndicate Syndicate Participation Corporate Total Participation Corporate Total Direct insurance operations Falling due within one year 990,685 - 990,685 761,243 - 761,243 Due after one year 6,847 - 6,847 12,261 - 12,261 ______ ____ ______ ______ ____ ______ £997,532 £- £997,532 £773,504 £- £773,504 ______ ____ ______ ______ ____ ______ Reinsurance operations Falling due within one year 2,616,918 - 2,616,918 2,450,353 - 2,450,353 Due after one year 749,818 - 749,818 870,803 - 870,803 ______ ____ ______ ______ ____ ______ £3,366,736 £- £3,366,736 £3,321,156 £- £3,321,156 ______ ____ ______ ______ ____ ______

40

TALISMAN UNDERWRITING PLC NOTES TO THE FINANCIAL STATEMENTS 18. Other Creditors Group 2017 2016 Syndicate Syndicate Participation Corporate Total Participation Corporate Total Corporation tax - 272,107 272,107 - 436,765 436,765 Other 2,550,616 1,607,642 4,158,258 3,765,064 1,317,717 5,082,781 Syndicates - - - (462,599) 462,599 - ________ ________ ________ ________ _______ ________ £2,550,616 £1,879,749 £4,430,365 £3,302,465 £2,217,081 £5,519,546 ________ ________ ________ ________ _______ ________

Company 2017 2016 Amounts owed to group undertakings 516,781 4,449 Dividends payable 40,336 41,802 Other creditors 1,552,895 1,275,915 Corporation tax - 27,448 Accruals and deferred income 77,704 65,620 _________ _______ £2,187,716 £1,415,234 _________ ______

Other creditors of £1,553,093 (2016: £1,275,915) represents monies received from loan note holders to support the Group’s underwriting. These monies are deposited as Funds at Lloyd’s.

19. Movement in Cash At Cash flow At 01.01.17 in year 31.12.17 Lloyd’s deposit 3,244,564 2,741,237 5,985,801 Cash at bank 3,292,560 (1,229,652) 2,062,908 ________ _______ ________ £6,537,124 £1,511,585 £8,048,709 ________ ________ ________

41

TALISMAN UNDERWRITING PLC NOTES TO THE FINANCIAL STATEMENTS 20. Related Parties 2017 2016 The following dividends were paid to the Directors: Peter Steel £15,922 £32,755 Robert Eaton £2,346 £4,377 David Monksfield £350 £720 Paul Sandilands £12,915 £25,830 David Monksfield is also Executive Chairman of Argenta Private Capital Limited (“APCL”). Members’

agents fees and profit commission are payable to APCL under normal commercial terms. Members’ agents fees and profit commission paid to APCL totalled £218,107 in the year ended 31 December 2017 (2016: £312,234).

21. Loan Stock In order to support the Group’s underwriting activities, the Company has issued the following loan stock: Original Called Balance Issue and Nil Nil paid Cancelled Paid £ £ £ ‘B’ loan stock 2000 2,037,796 1,967,804 69,992 ‘B’ loan stock 2001 2,223,778 1,959,804 263,974 ‘B’ loan stock 2002 2,051,795 1,812,819 238,976 ‘C’ loan stock 2000 299,970 299,970 - ‘C’ loan stock 2001 170,983 161,986 6,998 ‘C’ loan stock 2002 124,988 74,993 49,995 ‘C’ loan stock 2004 235,780 195,209 40,572 ‘C’ loan stock 2005 1,304,777 891,457 413,320 ‘C’ loan stock 2006 436,325 215,889 220,436 ‘C’ loan stock 2008 417,980 128,413 289,567 ‘C’ loan stock 2010 53,185 - 53,185 ‘C’ loan stock 2011 215,011 - 215,011 ‘C’ loan stock 2012 129,776 29,695 100,081 ‘C’ loan stock 2013 389,935 139,675 250,260 ‘C’ loan stock 2014 773,271 51,594 721,677 ‘C’ loan stock 2015 50,392 - 50,392 ‘C’ loan stock 2016 1,196,210 248,959 947,252 ‘C’ loan stock 2017 119,984 - 119,984 ‘C’ loan stock 2018 212,222 - 212,222 ‘C’ loan stock 2019 75,740 - 75,740 ‘C’ loan stock 2020 691,744 - 691,744 Any loan stock called has been converted to ‘A’ shares. The loan stockholders are obliged to make funds, equivalent to the par value of the loan stock, available

to Lloyd’s to support the group’s underwriting.

42

TALISMAN UNDERWRITING PLC NOTES TO THE FINANCIAL STATEMENTS 22. Syndicate Participation

The Group is or was an Underwriting Member of the following Syndicates:

2018 2017 2016 2015 Allocated Allocated Allocated Allocated Capacity Capacity Capacity Capacity £’000 £’000 £’000 £’000 No. Managing Agent

33 Hiscox Syndicates Limited 4,288 3,082 2,680 2,500 218 ERS Syndicate Management Limited 1,000 1,389 1,042 963 318 Beaufort Underwriting Agency Limited 680 737 737 705 386 QBE Underwriting Ltd 1,504 1,504 1,673 1,503 510 Tokio Marine Kiln Syndicates Limited 4,280 4,600 4,269 4,005 609 Atrium Underwriters Limited 2,503 2,338 2,338 2,194 623 Beazley Furlonge Ltd 2,232 1,939 1,640 1,333 727 S A Meacock & Company Limited - 353 353 353 958 Canopius Managing Agents Ltd - - - 950 1884 Charles Taylor Managing Agency Ltd - 330 330 200 1969 Apollo Syndicate Management Limited 300 385 330 282 1991 Coverys Managing Agency Ltd - 97 98 110 2010 Cathedral Underwriting Limited 1,125 1,297 1,297 1,257 2121 Argenta Syndicate Management Ltd 1,194 1,053 948 771 2525 Asta Syndicate Management Ltd - - 129 109 2791 Managing Agency Partners Ltd 1,769 1,769 1,770 1,677 4444 Canopius Managing Agents Ltd 1,000 1,041 1,041 - 5886 Asta Managing Agency Ltd 234 195 - - 6103 Managing Agency Partners Ltd (*) 120 40 30 27 6104 Hiscox Syndicates Limited (*) 100 225 219 250 6105 Ark Syndicate Management Limited (*) - - - 671 6111 Catlin Underwriting Limited (*) 200 628 1,240 1,072 ______ ______ ______ ______

£22,529 £23,002 £22,164 £20,932 ______ ______ ______ ______ (*) On a Limited Tenancy Basis 23. Funds at Lloyd’s

The Company’s subsidiaries have entered into Lloyd’s Deposit Trust Deeds which give the Corporation the right to apply these monies in settlement of any claims arising from the participation on the Syndicates. These monies can only be released from the provision of these Deeds with Lloyd’s express permission and only in circumstances where the amounts are either replaced by an equivalent asset, or after the expiration of the Group’s liabilities in respect of its underwriting. In addition to the funds held in the Lloyd’s Deposit (see Note 13) and the Corporate investments (see Note 10) totalling £8,542,113 (2016: £5,562,986) the Group’s Lloyd’s underwriting is also supported by bank guarantees from the loan note holders, and inter-available funds, of £4,836,671 (2016 - £4,475,316).

24. Ultimate Controlling Party

In the opinion of the Directors there is no ultimate controlling party of the Group.